Microsoft Corp.'s famously slippery ship dates are sliding once again when it comes to the company's long-delayed Microsoft CRM 2.0 update. Microsoft said Thursday it is expanding the software's feature set and delaying its release-to-manufacturing until the fourth quarter of 2005.

The move comes one week after Microsoft installed ex-PeopleSoft executive Brad Wilson as its new general manager of its CRM (customer relationship management) product. Partners say the delay is no surprise. Though Microsoft most recently said it would ship CRM 2.0 in the middle of this year, after delaying a planned 2004 release, those involved with the software say Microsoft was clearly not going to meet that deadline.

Microsoft ran a small alpha test of its updated software but hadn't yet begun a planned broader beta test, according to Mike Snyder, principal of Chicago-based Sonoma Partners LLC, a services firm that specializes in Microsoft CRM. "Obviously we'd like it sooner, but I don't think anyone will be surprised by this," he said.

Yankee Group analyst Sheryl Kingstone echoed that. "We knew it was going to be majorly delayed," she said, citing Microsoft's quietness about planned new features and the pace of its development work. She thinks Microsoft is right to hold off on a release until it can perfect the software. "The worst thing they could do is rush a product to market," she said.

The delay means that almost three years will pass between the initial release of Microsoft's CRM software, in early 2003, and its first comprehensive update. Last year it released a 1.2 version that addressed a number of the most critical gaps and bugs, but customers say the current software still lags competitive offerings.

"We've basically stopped using it until version 2 is available," said Michael Kruger, information systems manager for Designer Doors Inc., a door maker based in River Falls, Wisconsin. His company picked Microsoft CRM as its sales management software in late 2003, but soon hit major problems with lackluster Outlook synchronization and reporting capabilities.

"We're disappointed. We were hoping (version 2) would be ready soon," Kruger said. "However, I'm pleased they're not going to release it until it's ready. All things considered, I'd rather wait for the right product."

Microsoft has been tight-lipped about what new features will be added in version 2.0, but it said Thursday that the expanded scope of the software now calls for enhanced process workflows with all parts of the CRM suite, including new marketing and service automation features; simplified installation procedures; and component services enabling easier integration with other applications and data sources.

Microsoft CRM is Microsoft's bid for a share of the business applications market, where vendors such as SAP AG and Oracle Corp. dominate the high end and hosted service providers such as Salesforce.com Inc. are increasingly gaining traction with smaller businesses. Sonoma Partners' Snyder cited Salesforce.com as the main rival he encounters on new business pitches. Microsoft, in Redmond, Washington, claims a customer base approaching 3,500 companies for its CRM software.

Yankee Group's Kingstone said that in retrospect, Microsoft should have held off on releasing its CRM software into the market if it was going to need such a long development time before the 2.0 release. However, she sees the midmarket CRM space as an open field, in which vendors are better off focusing on slow, solid development rather than racing to capture market share.

Despite the compromises Designer Doors has made, Kruger said he still feels Microsoft CRM was the right choice. "I do believe that when version 2 is out, it will be close to the best product on the market," he said.